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Indian subcontinent ramps up LNG import capacity

Wed 31 Oct 2018 by Mike Corkhill

Indian subcontinent ramps up LNG import capacity
The Excellence FSRU operation in Bangladesh makes use of ship-to-ship transfers and a submerged turret loading link to a subsea pipeline

India, Pakistan and Bangladesh are all now importing LNG. Cargo discharge volumes are set to mushroom and FSRUs will be key to growth

India began importing LNG in 2004, Pakistan in 2015 and Bangladesh in 2018. The three South Asian nations have populations of 1,340M, 200M and 160M, respectively, and the gas market in all three is characterised by rising demand and dwindling domestic reserves.

While India is the established LNG player, cargo purchases by its east and west near-neighbours are poised to rise rapidly. LNG shipments to Pakistan and Bangladesh, however, are unlikely to ever match India’s import volumes. The majority of new LNG import terminal projects currently underway on the subcontinent are located in India.

India is the world’s fourth largest LNG importer. While the 19.22M tonnes purchased in 2017 was only 1.3% ahead of the previous year’s total, import volumes in 2018 are once again growing strongly.

Imports for the period April-July 2018 reached 7.46M tonnes, a 20.3% jump on the same period a year earlier. Utilisation rates at Dahej, the largest of the country’s four import terminals, with a capacity of 15M tonnes per annum (mta) of LNG, have been running at over 100% throughout this year.

Utilisation rates at the Dahej import terminal have been running at more than 100% over the course of 2018

All four Indian receiving terminals are located on the country’s west coast; the other facilities are at Hazira, Dabhol and Kochi. Over the next few years, the existing network will be joined by at least half a dozen new import terminals, three of which are set for an imminent start to operations within the end-2018/beginning-2019 timeframe.

The new 5 mta Mundra terminal, Gujarat’s third LNG receiving facility, is expected to receive its first cargo before the end of 2018. Gujarat State Petroleum Corp (GSPC) owns a 75% stake in the project and the private Adani Group 25%. GSPC has expressed interest in selling a part of its shareholding in the project, while Indian Oil Corp (IOC) has indicated an intention to acquire whatever stake might become available.

While IOC weighs up its options regarding involvement with Mundra LNG, the opening of its own new LNG receiving facility at Ennore in Tamil Nadu state is also at hand. Scheduled for a Q4 2018 start, the 5 mta Ennore terminal will be the first LNG receiving terminal on India’s east coast.

As is the case with Mundra LNG, up to 50% of the shareholding in the project is on offer to one or more strategic partners, such as an LNG supplier. This share of the equity is currently held by two Indian development banks anxious to divest their interests. In the meantime, IOC controls a 45% stake in the project while TIDCO, a Tamil Nadu government enterprise, holds 5%.

As is the case for several of the new LNG import schemes in India, Ennore is unlikely to operate at anything near full capacity for at least a year, and possibly two. Like Mundra, Ennore does not yet have any long-term LNG purchase contracts in place to ensure steady employment for its regasification capacity. The terminal will depend on spot cargoes initially.

IOC also has an involvement with another Indian east coast LNG scheme and, as is the case with Mundra, Gautam Adani’s Adani Group is the project leader. Adani Ports and Special Economic Zone (APSEZ), the group’s specialist port infrastructure developer, plans to build a 5 mta LNG import terminal at Dhamra in Odisha state.

IOC has signed an agreement with APSEZ giving it access to 3 mta worth of regasification services on a ‘use or pay’ basis over a period of 20 years. The state gas utility GAIL India Ltd has a similar arrangement in place with IOC, for 1.5 mta over a period of 20 years. The Dhamra terminal is under construction and is scheduled to commence operations in the second half of 2021.

“Although it has taken Pakistan three years to import its first 10M tonnes of LNG, the intention is to buy three times that volume annually by 2025”

Indian floating receivers

Like the Adani Group, H-Energy Pvt Ltd has also set out to develop Indian west and east coast LNG receiving terminals. And, as is the case with the Adani initiatives, the start-up of H-Energy’s west coast terminal, at the port of Jaigarh in Maharashtra state, is imminent, while the east coast project is a few years away from the start of commercial operations.

A unit of the Hiranandani real estate group, H-Energy is making use of the Höegh LNG-owned, 145,000 m3 floating storage and regasification unit (FSRU) GDF Suez Cape Ann to realise its Jaigarh scheme. H-Energy is taking the ship under a sublet arrangement from Total for a minimum of five years.

The 2010-built GDF Suez Cape Ann has the capacity to regasify up to 3.7 mta. The ship made a familiarisation visit to its Jaigarh jetty last May and is now at a Singapore repair yard for final modification work, prior to the start of operations early in 2019.

H-Energy expects to be processing around 2 mta of LNG at Jaigarh in the initial stages of the project, some of which will be supplied by Petronas under contractual terms that have yet to be announced. As part of its initiative, H-Energy will build a 635 km coastal pipeline, in stages, to open up new gas markets on India’s west coast.

H-Energy’s planned east coast terminal, for an offshore location near Digha in West Bengal, would also make use of an FSRU, although the final arrangement for the facility is still under review. A Q3 2020 start date has been targeted for the Digha terminal. H-Energy has agreed to form a joint venture with K Line of Japan covering the provision of the required regas vessel.

H-Energy has signed a heads of agreement with North West Power Generation Co Ltd (NWPGCL), a Bangladesh Power Development Board-owned utility, for 1 mta of LNG offtake at Digha.

Another supporter of the floating LNG import terminal approach is Swan LNG. The company is having a 5 mta, 180,000 m3 FSRU built at Hyundai Heavy Industries; on completion, it will be stationed at a purpose-built jetty at Jafrabad to become Gujarat’s fourth LNG terminal.

Commercial operations are expected to start early in 2020. Mitsui OSK Lines has acquired an 11% stake in the Swan LNG scheme and will operate not only the FSRU, but also an existing LNG carrier that has been modified for use at the terminal as a floating storage unit (FSU).

Swan LNG has already booked 60% of the FSRU’s regas capacity. IOC and two other state-owned oil companies – Oil and Natural Gas Corp (ONGC) and Bharat Petroleum Corp (BPC) – each plan to import 1 mta of their own LNG and pay Swan a tolling fee for processing it.

Pakistan picks up speed

Pakistan imported 4.62M tonnes of LNG in 2017, a 56.6% jump on the previous year. Although it has taken the country three years to import its first 10M tonnes of LNG, the intention is to buy three times that volume annually by 2025

Pakistan began receiving LNG in March 2015, when the 150,900 m3, 2009-built FSRU Exquisite, based at Port Qasim in the wetlands just to the east of Karachi, regasified its inaugural cargo.

The first Pakistan terminal is operated by Engro Elengy Terminal Pakistan Ltd (EETP). In July 2018 Vopak acquired a 29% stake in the project, joining Engro and International Finance Corp (IFC) as an EETP partner.

The country’s second LNG terminal, Pakistan GasPort (PGP), commenced operations in November 2017 and also makes use of an FSRU stationed at Port Qasim. The 170,000 m3, 2017-built BW Integrity, like Exquisite, has the capacity to process 4.5 mta of LNG and is employed under a 15-year charter with the PGP consortium.

Berthed in Port Qasim waters, BW Integrity entered service as Pakistan’s second LNG import terminal in November 2017

The government is embarking on an investment of US$8Bn in new gas transmission pipelines and combined-cycle gas turbine (CCGT) power stations to meet the country’s growing demand for gas.

Six additional LNG import projects have been proposed for Pakistan by the likes of ExxonMobil, Shell, Trafigura, Total, Mitsubishi and the Bahria Foundation. Most are planned for Port Qasim locations. If only four of the new schemes come to fruition, annual LNG deliveries to the country could reach the 30 mta level by 2025.

Of the proposed new LNG terminals, a project being developed by a joint venture comprising Shell, Engro, Gunvor and Fatima Group is closest to a final investment decision (FID). The plan calls for another 4.5 mta FSRU to be based at Port Qasim; Excelerate Energy, supplier of the EETP FSRU, has been lined up to provide the vessel.

The project partners are aiming for a Q2 2020 start date. Unlike the country’s first two FSRU projects, which sell regasified cargoes to government agencies under guaranteed arrangements, this second Engro scheme and all the other proposed new Port Qasim facilities are targeting the private sector.

Bangladesh in at No 42

Bangladesh is one of two countries to commence LNG imports this year, the other being Panama. Regasified cargo from Excelerate Energy’s Moheshkhali Floating LNG (MLNG) terminal began reaching customers in the Chittagong region for the first time on 18 August, at which point Bangladesh became the world’s 42nd LNG import nation.

Excelerate Energy is making use of its 138,000 m3, 2005-built FSRU Excellence to bring LNG to Bangladesh. The MLNG project utilises, as the point of entry for regasified LNG, a submerged turret loading (STL) buoy positioned off Moheshkhali Island in the Bay of Bengal.

Excellence, which has the capacity to regasify up to 3.5 mta of LNG, connects with the STL buoy by means of a moonpool arrangement in its bow and delivers regasified cargo ashore via a subsea pipeline.

Petrobangla, the country’s oil and gas company, is purchasing the necessary LNG import volumes in the world market. So far, it has signed 15-year sale and purchase agreements (SPAs) with Qatar for the supply of 2.5 mta and with Oman for 1 mta. The term coincides with the length of the Excellence charter. The MLNG project was jointly developed by Petrobangla, Excelerate Energy and IFC.

Bangladesh has turned to LNG imports to meet a gas supply deficit, now estimated at 20% and growing. A number of additional LNG receiving terminal projects have been tabled and, among these, a second is in its construction phase and set to augment Excelerate Energy’s MLNG scheme.

The Summit LNG (SLNG) project, which will make use of another Excelerate Energy FSRU on a 15-year charter, is due to commence operations in March 2019. The Summit FSRU will also utilise an STL buoy, to be positioned 6 km off Moheshkhali Island, not far from the MLNG project’s buoy.

The similarities do not end there; the SLNG project will also have the capacity to process up to 3.5 mta of LNG. And like the Excelerate Energy commitment to the MLNG scheme, Summit is developing the SLNG project on a build-own-operate-transfer (BOOT) basis. The facility will transfer to Petrobangla after a period of 15 years.

In August 2018 Mitsubishi Corporation (MC) agreed to acquire a 25% interest in Summit LNG Terminal Co. Following the deal, Summit Corp Ltd now holds a 75% stake in the SLNG project and MC the remaining 25%.

In the face of a continued depletion of domestic reserves, further LNG imports will be required on top of these projects to meet the rising demand for gas in Bangladesh. It is estimated that the country could be importing upwards of 20 mta of LNG by 2030.

Of four further world-scale and two small-scale LNG import projects that had originally been tabled for Bangladesh, three world-scale schemes remain in play. The proposals put forward by Petronet and Powercell call for the construction of shore-based terminals, while the final project, a Petronas initiative, would utilise an FSRU.

As outlined above, there is also the possibility that Bangladesh could import piped gas from India, delivered in the form of LNG to H-Energy’s Digha FSRU in West Bengal.

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